Ian Cowie was named Consumer Affairs Journalist of the Year in the
London Press Club Awards 2012. He has been head of personal finance at
Telegraph Media Group since 2008, having been personal finance editor
since 1989. He joined the paper in 1986. He is @iancowie on Twitter.

Cyprus: tax haven status turns into a trap for British pensioners

Cyprus encouraged many British pensioners to retire to the island with favourable tax treatment – but that proved cold comfort when the credit crisis forced banks to close.

Cyprus encouraged many British pensioners to retire to the Mediterranean island with a fixed 5pc tax rate in retirement and the ability to receive British State and company pensions without deduction of any tax.

Alternatively, each individual pensioner could choose to be allowed a larger allowance or tax-free band and then pay tiered rates of tax up to 30pc on income in excess of the threshold. There was no Inheritance Tax nor any Wealth Tax in Cyprus.

One financial adviser told me: “Many individuals retired to Cyprus to make their pensions go further. The UK/Cyprus double taxation treaty enables individuals who live in Cyprus to remit their UK occupational, personal and state pensions to Cyprus free of witholding tax in the UK.

“The pensions are then taxed in Cyprus at a flat concessionary rate of 5pc. For this reason, UK individuals with a large pension income stream can exchange income tax at 40pc in the UK for a rate of 5pc in Cyprus. This is one of the attractions of retirement there.”